UPDATE: It looks like Huawei plans to sue the U.S. government over its bans on use of Huawei gear in certin networks.\n\n\n\n\n\nThe Justice Department investigation into Huawei recalls a similar probe into whether Shenzhen rival ZTE broke U.S. sanctions by exporting devices containing American components to Iran. ZTE was found guilty last year not only of breaking the sanctions, which resulted in an $892 million fine, but of breaking the settlement deal\u2019s terms by failing to punish those involved.\nThe resulting seven-year ban on U.S. firms selling to ZTE will severely hamper its growth efforts because it relies on chips and other components from the likes of Qualcomm and Micron Technology. [Editor\u2019s note: The U.S. is considering lifting the ZTE sanctions as concession to avert an all-out trade war with China.]\n\nThe probe of Huawei, which is said to have been ongoing since early 2017, could result in similar punishment if the firm is found guilty of breaking sanctions. Washington has belatedly realized that China is supplanting the U.S. as the world\u2019s pre-eminent tech superpower, resulting in increasing efforts to corral the number one telecom equipment maker and third-largest smartphone maker in the world.\nNational security concerns have been used to keep Huawei down, first in 2012 when it and ZTE were de facto banned from the U.S. telecom-infrastructure market after a damning congressional report, and more recently when AT&T and Verizon were compelled to drop plans to sell the latest Huawei smartphones, and Best Buy stopped selling its devices.\nLike ZTE, Huawei could be severely restricted if it is hit with a components ban by the U.S. But Washington would likely be shooting itself in the foot with such a heavy-handed approach.\nA tech trade war with China looms\nFirst, China and its new leader-for-life Xi Jinping is more than ready and willing to stand up against what it sees as unfair trade practices by the Trump administration. It has already fired back with tariffs on U.S. food imports and will do so again if a proposed additional $100 billion in tariffs from the U.S. goes through. By the same rationale, could China respond to a ban on sales of U.S. components to Huawei by prohibiting the sale of China-made components to U.S. tech firms? Potentially, believes China-watcher Bill Bishop.\n\u201cThe U.S.-China technology war may run much hotter than the overall conflict over trade. Xi continues to make clear that China can no longer rely on foreign technology and must go all out to end its reliance on it,\u201d he wrote in his popular Sinocism newsletter. \u201cTechnology CEOs the world over with supply chain dependencies in China \u2014 so probably all of them \u2014 should be increasingly nervous and focused on their firms' efforts to have viable contingency plans for a U.S.-China technology cold war.\u201d\nBeijing-based Forrester principal analyst, Charlie Dai, tells IDG Connect the potential for disruption to US supply chains could be \u201csignificant.\u201d\n\u201cIt\u2019s hard to find effective contingency plans and the only way is to have everyone, especially the US government, to realize the importance of collaboration,\u201d he adds.\n\u201cIn a world where the global supply chain and value ecosystem have already become critical drivers for the business growth of large countries like U.S. and China, any further action like ZTE\u2019s case will hurt the economic relationship between the U.S. and China, which is the last thing that companies and customers want to see.\u201d\nChina\u2019s march toward self-reliance\nU.S. action against Huawei could be the reminder Beijing needs that it must become self-reliant in technology to achieve its \u201crightful\u201d place as the number one global superpower. This has been a goal of Xi\u2019s for years. In fact, that\u2019s what the controversial Made in China 2025 initiative is all about \u2013 reducing reliance on foreign suppliers.\n\u201cHeavy dependence on imported core technology is like building our house on top of someone else's walls: No matter how big and how beautiful it is, it won\u2019t remain standing during a storm,\u201d Xi said as far back as 2016. The Chinese government has already set up a fund which aims to raise up to 200 billion yuan ($31.7 billion) to back a range of domestic firms including processor designers and \u00a0equipment makers. Although chips are the number one target, China\u2019s efforts to become self-sufficient in tech expand to other spheres. It has long been trying to nurture a home-grown rival to Windows, although efforts so far have not been hugely successful.\nIt\u2019s not just Chinese firms the US must be wary of, according to James Lewis, SVP at the Center for Strategic and International Studies.\n\u201cThe seven-year ban on U.S. components will only encourage foreign suppliers to rush into the space vacated by US companies,\u201d he said of the ZTE case. \u201cIt will reinforce the Chinese government\u2019s desire to replace US suppliers with Chinese companies. And it will lead others to begin to make things they did not make before, causing permanent harm to the market share of U.S. companies.\u201d\nOne final word of warning to U.S. tech CEOs: if China is looking to close the gap on technology capabilities, be prepared for a new wave of cyber-espionage attempts focused on stealing IP, he said. Innovation may be the first of Xi\u2019s \u201cfive major concepts of development,\u201d but that hasn\u2019t stopped the nation pilfering in epic quantities in the past to gain parity with the West,.\nCan China go it alone?\nThe modern technology industry is fundamentally reliant on a global network of technology development and manufacturing partnerships. The prospect of China separating itself from that ecosystem seems unlikely on the face of it.\n\u201cIt\u2019s impossible for most countries, if not all, to be self-sufficient in all tech components,\u201d claims Forrester\u2019s Dai. \u201cOne chip relates to many different hardware and software components. It requires continuous investments which are hard to realize in the short-term.\u201d\nThat may be so but bet against China at your peril. If any country has the resources, and now the determination to do it, it\u2019s the Middle Kingdom.